Senate Committee Hears Concerns Over Financial Aid
WASHINGTON — Congress needs to act to keep interest rates on federally subsidized student loans from doubling this summer, the chairman of the Senate education committee said.
Undergraduate students face a sunset date this summer on their lower interest rate. These rates will double from 3.4% to 6.8% on federally subsidized loans on July 1, unless Congress acts.
Senate Health, Education, Labor and Pensions Chairman Tom Harkin speaks during a news conference about preserving Medicaid funding during the "fiscal cliff" negotiations at the Dirksen Senate Office Building on Capitol Hill December 11, 2012 in Washington, DC.
Sen. Tom Harkin, the Iowa Democrat who is chairman of the Senate Health, Education, Labor and Pension Committee, emphasized the need to sustain the current loan rates.
“With overall interest rates stuck at historic lows,” Harkin said at a committee hearing, “we cannot simply allow Stafford Loan interest rates to double for middle-class students and families struggling to afford a higher education.”
Sen. Jack Reed, the Rhode Island Democrat, and Rep. Joe Courtney, a Connecticut Democrat, introduced legislation last week that would maintain the current rate for two years. Faced with the same dilemma in 2012, Congress renewed the lower interest rates for a year, extending a policy enacted in 2011.
Vivica Brooks, a senior at Bowie State University in Maryland, thanked the senators for the lower rate, calling it “critical to making higher education more affordable.”
Financial aid is increasingly common. According to the National Association of Student Financial Aid Administrators, around 9.3 million students relied on federally subsidized Stafford loans totaling in $39.7 billion for the 2010-11 school year. The total student loan program cost taxpayers $36.9 billion in fiscal year 2012, according to Congressional Budget Office data.
“It’s important to recognize that, first off, (these) are targeted at the most needy students,” Ethan Senack, a higher education associate at the U.S. Public Interest Research Group, told the committee. “We’re talking about the students who needed more money to go to school than what’s granted.”
But Sen. Lamar Alexander of Tennessee, the top Republican on the committee, expressed concern about the “huge amount of federal money which follows students to the college of their choosing.”
There also was heated discussion around the Pell Grant Program. In 2011, the maximum award covered two-thirds of average tuition for in-state students at public universities and just over a quarter of out-of-state tuition.
Alexander pointed out that the average Pell Grant award was larger than the average community college tuition, which third-party data confirms.
According to the Department of Education and American Association of Community Colleges, the average Pell Grant award in 2011 was $3,800 while the average community college tuition in the 2011-12 school year was $2,963.
In March 2010, Congress passed a bill reforming the student loan process, which, among other things, made the Pell Grant more generous by linking it to consumer price index from 2013 to 2017. The full amount of the award is expected to increase from $5,550 to $5,975.